In 1998, a young eBay announced it had exceeded 21 million bids, 3-year-old Amazon.com proclaimed $610 million in sales and every wannabe billionaire on the block wanted a shot at being the next Net icon. Suddenly, the guy down the street who scores Cubans was selling them online. Entrepreneur "impostors" were everywhere-in it for the quick buck and the big hit rather than the passion of running a business for the long haul.
Today, the moral of the story is all too apparent, and Americans are backlashing against entrepreneurs. The question is, Will the bum rap also affect those of you who were mere bystanders in the dotcom debacle?
As a point of fact, entrepreneurs lost the respect of 15 percent of adult Americans in the past year, according to a survey by the Kauffman Center for Entrepreneurial Leadership and Babson College. Only 76 percent now respect you, as compared to 91 percent in 1999. Blame it on the dotcom craze: "In 1998 and 1999, we were hearing about all these 25- to 35-year-olds making millions of dollars, at least on paper. People look at anybody young who generated that kind of profit as being lucky and not really working hard for it," says Andrew Zacharakis, professor of entrepreneurship at Babson and leader of the survey. "Then, when the stock market started to correct, and some of these companies lost 90 percent of their value, the individual investors who had bought into the Nasdaq may have felt like the entrepreneurs got theirs and left [investors] holding the bag."
Bona fide entrepreneurs were left holding the bag as well. Just ask Jane Applegate, small-business journalist/ author and founder of multimedia communications company The Applegate Group Inc. and the Small Business Television Network (SBTV). Last May, SBTV delved into streaming video at www.sbtv.com, just before investors began fleeing broadband. Even though Applegate's team boasted veteran producers from Bloomberg, CNBC, CNN and PBS, wary investors didn't feel safe. "A lot of people in the broadband content arena set up business models and sites that gave everyone else a black eye," says Applegate, 48. "Pseudo.com [the bankrupt Net broadcast company purchased by New York City media center/Internet 'powerstation' INTV Inc.] spent millions of dollars producing party coverage out of their offices in New York."
Applegate didn't become a statistic because she never forfeited her core business: producing TV shows and covering small-business news for clients like <'>Newsweek</'> and 45 U.S. newspapers. While she recognizes the negative impact of the dotcom nosedive, she sees a brighter side. "The resentment built up with so many people losing their careers and investments has created the negative perception," she says. "But the good news is that the traditional brick-and-mortar entrepreneurs who stayed on the sidelines during this insanity can say, 'I told you so' and feel good about not participating and losing their businesses."
Michael Caito, 33, Matt Martha, 30, and Anthony Caito, 30, could very well say, "I told you so." But the owners of Restaurants on the Run, a Lake Forest, California, multirestaurant delivery/catering and marketing service, focus on the exposure even fallen delivery Web sites and portals garnered for the industry. "A lot of them tried to facilitate delivery without owning the infrastructure," says Michael.
But the efforts of failed dotcoms like Kozmo.com were profitable-for some. "As fast as they were coming up, the busier we were getting," says Anthony. "They were spending all this money foolishly, but, [essentially,] they were spending it on us."
Securing their own funding was more difficult. "We were saying, 'Hey, if these guys don't have a profit model and are raising all this money, I wonder if we can get some money,'" says Michael.
After being turned down by investors in the late '90s because the business wasn't as "sexy" as dotcoms, Restaurants on the Run, which delivers about 15,000 orders monthly for 300 Southern California restaurants and uses the Net as an efficiency tool with which to do it, did receive funding last year. "We had a proven and profitable business model for four and a half years before the dotcom revolution hit," says Martha.
And loan officers' perception of you? They may be leery of pitches from dotcom entrepreneurs these days, but a solid business model is a solid business model. Says Constance Krehbiel, vice president of America California Bank in San Francisco, "It just depends on the business and strength of the businessperson, and whether it looks like they would be able to weather any kind of downturn."
In addition to the fact that general respect will rise with each new success story, there's at least one benefit to the besmirching of the entrepreneurial name: The days of the best entrepreneur not necessarily winning the race are gone. "This may be the best time to go after opportunities, because not everybody's going after the same opportunity [anymore]," says Zacharakis. "Talented entrepreneurs are going to be facing less competition."
Yes, the pretenders are dropping out-but the genuine entrepreneurs are standing their ground. "Entrepreneurs and small businesses-the freedom of capitalism-make the United States the United States," says Michael. "I think everybody has a dream to be in business for themselves."